First things first, why do we call them Bull and Bear markets? While there are different interpretations of where the names come from, the most common one relates to the way the said animals act. Specifically, both "bear" and "bull" derive from the way the animals attack their opponents. In other words, a bull will thrust its horns up into the air, while a bear will swipe down.
This metaphor was then applied to the movement of the markets. Uptrends were regarded as bull markets and downtrends were seen as bear markets.
Global economic events have the power to affect the markets and the first quarters of 2022 have kept traders and investors on the edge of their seats. Keep reading to find out what you can do when the markets are bearish!
Understanding Bear Markets
When the market falls by at least 20% over a period of two months, it is considered a bear market. It is important to remember that bear markets can result from recessions in which unemployment is high and GDP is negative.
What can you do?
·Avoid impulsive reactions
Bearish market sentiment can appear troubling and challenging. With falling prices, you may start to fear the future of your investments. However, it is in such moments that you need to maintain your calmness and discipline so as to not resort to on-the-spot decisions that could be damaging to your trading positions. Your next move should be based on a variety of factors and not just a sudden change in the markets.
·Think about your goals
An effective way to stay disciplined throughout the day is to always bring to mind your ultimate trading plan. This plan includes your trading strategies, your exit options, your goals, and your risk management strategies. By remembering these aspects, you will feel more confident in taking or not taking the next opportunity to trade, because your trading plan will guide you throughout your decisions.
·Identify strategic opportunities
As a trader, you probably already know that online trading comes hand in hand with both profits and losses. Therefore, it is your responsibility to be on top of your trades and one step ahead of economic events. By boosting your trading skills and knowledge, you will be able to more easily identify opportunities to enter or exit the markets.
The most Significant Bear Markets of the last 15 years
● October 2007—November 2008
With a market drop of nearly 52%, a bear market lasted for 408 days. This is the period when the housing market collapsed and is known as the Great Recession, which lasted through Q3 of 2009 when an economic boost package was approved.
● February 2020—March 2020
This was a short bear market as it lasted only 33 days, but had a huge impactful market drop of nearly 34%. The global pandemic had impacted every socioeconomic aspect and the markets witnessed the consequences. Unemployment also exceeded 14.5% due to restrictions, safety measures, and budget cuts.
What’s important to keep in mind when roaming the markets is that everything could change at any time. The highly volatile nature of the markets requires patience and perseverance. For this reason, it is vital for traders to keep boosting their knowledge and skills, and our team at XPro Markets has made sure to provide you with educational resources to help you face every “bear” and “bull” that may arise.
Risk Warning: Contracts for Difference (‘CFDs’) are complex financial products, with speculative character, the trading of which involves significant risks of loss of capital.
Disclaimer: This material is considered a marketing communication and does not contain and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.
